If you are in the Micron Technology (MU) put or covered call position, I am recommending you buy a protective put to hedge against a possible market sell-off following today’s Federal Reserve announcement.
Note that this put is being purchased as a hedge. Ideally, the market will go up and it will expire worthless. However, in the event the market sells off sharply, the purchased put could explode in value. If that happens, we will look to pocket profits to help reduce our net debit/cost basis on the positions and/or roll to a lower strike to keep our hedge in place.
I am also recommending we buy a protective put on our Target (TGT) LEAP. This strategy worked out very well for us when we used it prior to Target’s earnings announcement. Again, this put is primarily an insurance policy, but we could reduce our cost basis if the stock tanks.
MU Jun Monthly (6/17) 70 Put
Current Stock Price: $58.81
Cash in Hand: $0.53
Action: Buy to open the MU Jun Monthly (6/17) 56 Put around $0.49, but adjust as needed to buy a put today
New Cash in Hand: $0.04
MU Jun Monthly (6/17) 72 Call
Current Stock Price: $58.52
Cost Basis: $72.92
Action: Buy to open the MU Jun Monthly (6/17) 56 Put for around $0.49, but adjust as needed to buy a put today
New Cost Basis: $73.41
TGT Jan 2023 (1/20/23) 200 Call
Current Stock Price: $146.13
Cost Basis: $15.13
Action: Buy to open the TGT Jun Monthly (6/17) 140 Put for around $0.85, but adjust as needed to buy a put today
New Cost Basis: $15.98